Forbo Holding (VTX:FORN) Will Pay A Dividend Of CHF25.00

Forbo Holding AG (VTX:FORN) has announced that it will pay a dividend of CHF25.00 per share on the 11th of April. This payment means that the dividend yield will be 2.8%, which is around the industry average.

See our latest analysis for Forbo Holding

Forbo Holding's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Forbo Holding's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 24.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

Forbo Holding Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from CHF14.00 total annually to CHF25.00. This means that it has been growing its distributions at 6.0% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. In the last five years, Forbo Holding's earnings per share has shrunk at approximately 4.8% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Forbo Holding's Dividend

Overall, a consistent dividend is a good thing, and we think that Forbo Holding has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Forbo Holding that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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